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Bankruptcy Filings Lower in States that Don't Garnish Wages

Submitted by Jen Jones on Wed, 07/08/2009 - 4:14pm

Even though it completely runs in opposition to the intended goal, many states allow creditors to seize your wages should you not be able to pay a debt. The contradiction is easy to see: how can you pay your debts if your income is diminished?

Evidence is now on the table that bankruptcies are filed at a much higher rate in every state that empowers creditors to reach into your paycheck directly to get their money. The impact stems from the fact that if a creditor seizes funds directly under such a state law, they limit a person's ability to pay other creditors as well. So while one company may get paid back, all the others to which money is owed have substantially less chance of being paid. Simply put, garnishing wages only serves to severely weaken an individual's economic wherewithal.

The news of the connection between wage garnishment and bankruptcy stems from a three-year study by the Associated Press, which tracked millions of bankruptcy records across all states by using an "Economic Stress Map."

Thankfully, North Carolina prohibits the practice (except in extreme cases of child support neglect and tax delinquency) and as result, the Tar Heel state has only a third of the bankruptcy filings as Tennessee. South Carolina, Pennsylvania, Florida and Texas are other states that do not allow or limit a creditor's rights to take money directly from your paycheck. However, in North Carolina, your wages may be garnished for such debts as student loans, child support, or back taxes. If your wages are being garnished for any reason, it's important to realize that bankruptcy can put an immediate stop to the garnishment, and put you back on the track to financial freedom.

Although most courts limit the amount of money that can be seized, for just about everyone facing financial problems of that magnitude, the slightest reduction in monthly income can create serious turmoil. More over, it can quickly lead to increased stress in an individual relative to their money woes, leaving them to feel powerless and invaded.

Making matters worse are reports that the level of aggression relative to wage garnishment is on the rise in the states that allow it. Basically, creditors are seeing more competition for money that's owed and as a result, want to be first in line. The approval to garnish wages is often the winning strategy.

A woman in Alabama had been in a relatively sound financial position until debts incurred from assisting a former roommate came back to haunt her. Able to afford her mortgage and recently paying off thousands in credit card debt, she was suddenly over-burdened as a result of her roommates inability to pay. Once the wage garnishments started, she couldn't adequately handle any of her debt and filed bankruptcy to protect herself.

Thankfully, North Carolina is one of the five states where judges rarely allow wage garnishment. However, this won't stop a creditor from suing you and attempting to collect in other ways, such as attempting to levy a bank account, or worse, attempting to sell your house through a sheriff's execution sale. If you are facing overly aggressive bill collectors, contact a bankruptcy attorney today. Bankruptcy will stop the bill collector calls, stop a lawsuit, and put you back on your feet in these tough economic times. Call a bankruptcy attorney today.

The Law Offices of John T. Orcutt, with offices in Raleigh, Durham, Fayetteville, Wilson. Call today to set up your free initial debt consultation. 1-888-234-4181.